Beware the holiday shipping logjam

It looks like Santa got stuck in a holding pattern orbiting many homes this Christmas. The shipping chaos was far more widespread than I realized. I ran afoul of the situation at Groupon described by the Wall Street Journal’s MarketWatch, and thought it was pretty ridiculous that an item purchased on Black Friday couldn’t be shipped in time for Christmas. I didn’t realize how many people were encountering the same problem, with a variety of items:

Companies from Amazon.com Inc. to Kohl’s Corp. and Wal-Mart Stores Inc. promised to deliver items from headphones to television sets before Christmas, but shipping delays left gift-givers across the country without anything to put under the tree.

On Christmas Eve, Brandon Scott was still waiting for a 46-inch Samsung TV and Kate Spade watch he ordered from Amazon on Saturday.

“I’m frustrated because these items could have easily been purchased at various retailers in my area, something I would have gladly done had Amazon not guaranteed’ their arrival before Christmas,” said Mr. Scott of Ann Arbor, Mich.

[…] In Alexander City, Ala., Kohl’s shopper Andi Burks grumbled over the realization she wouldn’t be able to give her husband the sweaters Ms. Burks had ordered on Dec. 19, a day before the cutoff for “guaranteed Christmas delivery.”

“I thought that since they had stated on their website that it was guaranteed to arrive on time that I would be OK,” she said referring to Kohl’s. “Apparently I was wrong.”

Kohl’s said on Tuesday it would pay the full cost of all items not delivered in time. “We are deeply sorry for disappointing our customers expecting delivery in time for Christmas,” spokeswoman Jen Johnson said.

Groupon Inc. sent customers an email this week suggesting they print out a picture of their present in lieu of the promised on-time delivery of the actual gift, as well as a $25 gift certificate. “We know it doesn’t make up for the disappointment of not getting your item in time for the holidays,” the email said.

The deals site “successfully fulfilled and delivered an overwhelming majority of orders,” said spokesman Nicholas Halliwell.

Hmm… where have we heard that “overwhelming majority of customers” talk before, backed up by nothing in the way of reliable statistics? Ah, yes: ObamaCare. Is the private sector going to embrace that “close enough for government work!” spirit of blustery promises and half-assed execution?

MarketWatch thinks the delivery problem was exceptionally bad this year, ironically driven by the eagerness of brick-and-mortar retailers to offer online shopping alternatives – a move driven in turn by the utter hell Black Friday (and now Black Thursday!) shopping has become. This evidently led to a level of demand that shipping companies could not easily keep up with, although the shipping industry – UPS in particular – has been grumbling that it’s not to blame for most of the busted delivery promises, because the retailers never handed the packages off to them. This contention is supported by some of the Black Friday washouts detailed by MarketWatch:

Part of the problem is handling an increased number of orders in a shorter time frame, given that there were six fewer shopping days between Thanksgiving and Christmas this year.

“These retailers just don’t have enough labor,” Mr. Saridakis said, noting that while most of the distribution centers are automated, “you still need people to pack and unpack boxes.”

Retailers like Amazon and Wal-Mart have been building more fulfillment centers and other infrastructure to handle surging online orders. This year, Amazon hired 70,000 seasonal workers for its U.S. warehouses, a 40% increase from the year before.

To ease pressures on possible shipping bottlenecks, many retail chains have promoted the option to pick up items purchased online inside stores. That plan might have backfired for companies like Wal-Mart, where dozens of customers complained that items weren’t available for pickup in stores by the promised date.

The problem seemed to be biggest for customers who had lined up for hours during Thanksgiving weekend to get special deals on popular televisions and tablets.

As part of Wal-Mart’s Black Friday promises, shoppers who lined up for the best door-buster deals were told that if the store ran out of stock, then the items they paid for would be available for store pickup by Dec. 22. But in some cases, the items weren’t available and shoppers jammed customer-service phone lines and took to Facebook and Twitter to gripe at the retailer.

It’s hard to believe that failure to receive an item ordered over the Thanksgiving weekend can be blamed on the shipping company; that’s much more plausible for the surge of last-minute shopping in the final days before Christmas. In my own example, Groupon canceled my order without telling me – the notification arrived by email a couple of days after I checked their website and discovered the tracking status of the item was now “order canceled” – and never gave me an option to await delayed shipment. That’s obviously not something they can pin on shipping services, especially if some products were less likely to be delivered than others.

It sounds like a lot of this mail-order train wreck was due to over-selling limited goods, a matter of poor inventory control, and maybe a bit of speculative greed. “Let’s sell as many of these things as possible and worry about securing the inventory later!” is a lousy business model, as is putting forth marquee sale items that will never be delivered, in hopes of squeezing add-on sales from online shoppers. That sort of thing happens in the brick-and-mortar world too, but at least they’re usually honest about the scarce supply of doorbuster items – that’s why Black Friday is hell – and shoppers learn the item is unavailable before they purchase it and consider their Christmas shopping handled.

Perhaps this whole mess is more properly understood as a flaw in loading so much retail business into such a short time frame – even shorter than usual this year, as MarketWatch notes. Retailers, distributors, and shipping companies can only do so much seasonal hiring to meet demand, and the job market can only support so many temporary seasonal jobs. An economy where everyone clutches their dollars tightly until the big holiday sales puts a great deal of strain on the retail business model, both in-store and online. The online sector adds a level of convenience that removes the self-regulating element of people deciding they don’t want to go anywhere near a mall on Thanksgiving weekend.

Normally I’d think the Christmas 2013 delivery problems would create a much-needed opportunity for brick-and-mortar retailers in 2014, with ads trumpeting that you can only be sure your loved ones will get their presents if you come into the store and buy them, but since those retailers also had severe fulfillment problems this year, that strategy may lose some of its effectiveness. The big challenge for next year will be convincing those who got burned in 2013 to give outlets that let them down another chance. It would be a bitter development if the holiday season retailers have come to rely upon so heavily turned into a black hole that crashed their entire business model, as shopping collapses into a mad one-month scramble that ends in a money-losing geyser of refunds and compensation credit.

Update: The mail page of the Wall Street Journalalso reported on this today, in an article that adds more details about the shipping problems that plagued online retailers, Amazon in particular. But I think there are actually two different issues here: the “late surge in buying” that “blindsided” both UPS and retailers, and a more serious inventory control issue that messed up purchases made as far back as Thanksgiving weekend. UPS and Amazon seem to be doing a bit of snarling at each other over the last-minute snafus, but it’s tough to blame UPS for dropping the ball on an order placed in late November.